Warren Buffett and Charlie Munger

Would you pay millions to have a Buffett lunch? For more than 18 years, people have tried to outbid each other to have lunch with the Oracle of Omaha – Warren Buffett. This year the winning bidder shelled out $2.68 million for the privilege of having lunch with the man.

I have some good news for you. You can get the wisdom of Warren Buffet and his right hand man, Charlie Munger if you pick up the book titled “All I Want to Know is Where I’m Going to Die So I’ll Never Go There”. Yes, that is the title of the book. I was almost not going to read it. I thought it would be another compilation of financial mumbo jumbo and ratios. Then I read the subtitle. It says, “Buffett and Munger – A Study in Simplicity and Uncommon, Common Sense.”

The book is presented in the form of a conversation between a seeker of wisdom, Buffett, Munger and (in my view redundant) a character called Librarian. The advice ranges on everything from how to invest, how to hire the right CEO, how to manage your career and yes, even how to choose a spouse.

“People spend more time planning the wedding than the marriage.”

Tip No 1: Spend time reading

How did the Buffett-Munger duo acquire their wisdom? Their answer

“If you want to be the outlier in terms of achievement, spend your time reading and thinking. It helps you to take decisions quickly when the situation arises.”

They schedule time to think and do not multi-task. If something works, they repeat it. This is also their investment philosophy.

Tip No 2: Save money when you are young

They speak of the “magic of compounding at high returns”. $100,000 invested at 10% compounded annually amounts to roughly $673,000 after 20 years and 20%, $3.8 million. After 30 years the difference increases to 14 times. That needs a certain kind of temperament. They observe that a lot of people with high IQ are terrible investors because they have terrible temperaments. “You need patience and discipline and an ability to take losses without going crazy.”

They are suspicious of investment bankers. Their incentives are all designed to help them, not the customer. Their view, “Don’t ask the barber if you need a haircut.”

Tip No 3: The Inversion Principle

For me, this was the biggest life-lesson from the duo. They say, to examine how businesses become big and strong, study how businesses decline and die. Then avoid doing those. This principle of inversion applies everywhere.

If you want to help India, make a list of things that will harm India and then studiously avoid doing those things. Keep things simple. To stay healthy, make a list of things that will make you really unhealthy and sick. Then avoid doing those.

The two wise men collect instances of bad judgment and then find ways to avoid it. This is the simplicity of their wisdom. If they do not understand a business and see how it will look ten years from now, they do not invest in it. They have a rule: “We do not do startups”. They say they do not understand the business model of Facebook which is based on people documenting indiscretions. So they never invested in it.

Tip No 4: Hiring is expensive. Think hard

Their thumb rule for leaders, “If you can’t deliver a subordinate who is capable of taking over from you – if you haven’t trained that into your system – we’re not going to promote you.”

Hiring an assistant at a salary of $20,000 is actually a $3million decision. Factor in raises, benefits and expenses over a lifetime. So hire wisely and minimize the number of employees. A wrong hire is expensive.

“No matter how hard you throw a dead fish in the water, it still won’t swim.”

The author Peter Bevelin has done a fabulous job of compiling the wisdom and insights from the Buffett-Munger combo. The result is a gem that you can read today, make your notes and pass it down to someone starting their career. They could do the same for their progeny. This is a must read book.

Comments

I am currently reading ‘Tap dancing to work’ which is more a compilation of Fortune articles on Buffet. It’s more elaborate and some of those articles need a re-read due to all the financial jargons… But it’s a must read if you are interested in the Buffet way of thinking and investing.

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About Abhijit

Abhijit Bhaduri works as the Chief Learning Officer for the Wipro group. He lives in Bangalore, India. Prior to this he led HR teams at Microsoft, PepsiCo, Colgate and Tata Steel and worked in India, SE Asia and US.

He is on the Advisory Board of the prestigious program for Chief Learning Officers that is run by the Univ of Pennsylvania.